Guide
How Gratuity Works for Chauffeured Rides
Last updated
Most limo and black car operators add a set gratuity (often 15–20% of the base fare) to every trip, and many also let passengers add an optional tip after the ride. The included gratuity is part of the price; the extra tip is the passenger’s choice. Either way, the operator should track which chauffeur earned it and pay it out through payroll.
Gratuity causes more confusion on limo invoices than any other line. Passengers aren’t sure whether it’s included, chauffeurs want to know what they earned, and operators need it to add up at payroll. Most of the confusion goes away once you separate three different things: included gratuity, the STC, and an optional tip.
What is included gratuity on a limo ride?
Included (or automatic) gratuity is a set percentage the operator adds to every trip’s price, typically 15–20% of the base fare. The passenger agrees to it when they book, and it appears on the invoice as its own line.
Most operators include it because chauffeured passengers expect a gratuity and corporate clients prefer one predictable number to a tip decided in the moment. Tell customers it’s included when you quote, and label it clearly on the invoice (“Gratuity — 20% of base fare”) so nobody tips twice by accident — or feels misled when they notice it.
What is an STC, and is it the same as gratuity?
No. An STC (standard or service transportation charge) is a fee the operator keeps to cover costs such as insurance, vehicle upkeep, and admin. It is not a gratuity and doesn’t automatically go to the chauffeur.
Because passengers often assume any percentage line is a tip, label the STC plainly and don’t present it as gratuity. Some states and cities have rules about how service charges must be described to customers, so check what applies where you operate.
Should gratuity be calculated on the base fare or the total?
On the base fare (or the hourly charge), after any discount — not on tolls, parking, airport fees, or tax. Those are costs passed through to the customer, and adding a percentage on top of them looks like padding.
Some operators also include billed wait time in the gratuity basis, on the reasoning that the chauffeur was working that time. Either approach is fine; pick one and apply it consistently.
Can passengers add a tip on top of the included gratuity?
Yes, and many will if you make it easy. Offering an optional tip after the ride — for example a short thank-you email with a link and a few suggested amounts — lets a passenger reward a chauffeur who went out of their way, without pressure at the door.
Keep it genuinely optional and mention that gratuity was already included. Base suggestions on the fare, not the total.
How do chauffeurs get paid their gratuity?
Through your normal payroll. Keep a monthly record per chauffeur of the included gratuity on the trips they drove and any extra tips passengers added, so you can pay it out accurately and answer questions with numbers.
Credit gratuity to the chauffeur who actually drove the trip, not whoever was originally assigned. If a passenger paid an extra tip by card, the chauffeur should receive the tip itself; how card processing costs are handled is something to decide and state clearly in your pay policy.
How is gratuity treated for taxes?
It depends on how it’s charged, and the rules are worth checking with your accountant. Broadly, the IRS treats an amount the customer must pay — such as an automatic gratuity — as a service charge paid out as wages, while a voluntary amount the passenger chooses is a tip.
That distinction affects payroll reporting, and sales tax rules for gratuities and service charges vary by state. Federal tip rules have also changed recently. Ask your accountant how your included gratuity, extra tips, and STC should be handled for your business and your chauffeurs (employees and independent contractors are treated differently).
This guide is general information, not tax or legal advice.
How Farely handles this
In Farely, included gratuity is a percentage on your rate sheet (overridable per house account), always calculated on the base fare and never taxed. After a single ride is marked Done, Farely can email the passenger a thank-you with a tip link — 15%, 20%, or 25% of the fare, or a custom amount — and the monthly gratuity report shows included gratuity and extra tips per chauffeur, ready for payroll. See passenger gratuity.